Speculation Tax – Choosing the Completion Date and Possession Date
On February 22, 2018, the B.C. budget introduced its new proposed speculation tax which was brought into law on November 27, 2018 under the Speculation and Vacancy Tax Act, SBC 2018 c.46 (the “Act”). The B.C. speculation tax targets owners of residential properties in parts of British Columbia whose properties are vacant.
The taxable regions of British Columbia include the owners of vacant properties in the municipalities of Kelowna, West Kelowna, Metro Vancouver, Abbotsford, Mission, Chilliwack, Lantzville, Capital and Nanaimo districts. Each residential owner of a property located in a taxable region as of December 31 of a calendar year must submit a declaration on or before March 31 each year with respect to the prior calendar year. For example, on or before March 31, 2019, an affected owner must make his, her or its declaration with respect to January 1, 2018 – December 31, 2018.
It is prudent to take note of the importance of the date December 31. Representatives of Service B.C., the government office handling the speculation and vacancy tax, have confirmed that the duty to declare pursuant to Part 5 of the Act applies only to persons who own properties in the taxable regions on December 31 of each calendar year. Accordingly, this date should be given due consideration in selecting a completion date and possession date for the purchase and sale of a property located in a taxable region.
If you are selling a property that would otherwise be subject to the speculation and vacancy tax for the calendar year, it is preferable to have title to the property transfer (ie. choose a completion date) prior to December 31. This is to avoid having to make a declaration pursuant to Part 5 of the Act. It is prudent to select a completion date with a “buffer zone” of a few days (or even weeks) to ensure that there are no delays on completion and/or the registration of the transfer before December 31.
If you are purchasing a property located in a taxable region and you will not be eligible for an exemption from the speculation and vacancy tax (except for the recently purchased property exemption), it is preferable to have title to the property transferred and obtain possession of the property (ie. choose a completion date and possession date) after December 31. This is to maximize the exemption available under the recently purchased property exemption (provided that you satisfy all of the other requirements to receive the recently purchased property exemption).
For additional information about the speculation and vacancy tax (including speculation and vacancy tax rates and exemptions), please visit our blog “Speculation Tax Update” which can be found here: https://touchstonelawgroup.com/kelowna-lawyers/speculation-tax-update/
In addition, we recommend seeking the advice of an accountant regarding the speculation and vacancy tax in your specific circumstances and the applicability the general anti-avoidance rules (GAAR) under the Income Tax Act, RSC 1985 c.1.
Author: Dani Brito
This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637 or any of our lawyers practicing in the area of real estate law at the following: